Банкеръ Weekly



For a second year now the Bulgarian Telecommunications Company (BTC) is somewhere between the governors' willingnewss to sell it and their practical inability to do so. After numerous postponements and impediments the Privatisation Agency (PA) should had fixed by mid-September a date for the signing of the final contract with the picked buyer Viva Ventures, a subsidiary to the US investment fund Advent International. However, it did not do that. Top government circles still cannot reach an agreement about the deal.In fact, the delay of BTC's divestment reflects most tangibly on the telecom operator itself. It hampers its modernization and digitalization. The implementation of the investment programme was suspended last August.At a mass meeting on Tuesday (November 18) representatives of all syndicate organizations in the BTC appealed for cancelling the present procedure for the telecom's privatisation, accepting a new transparent strategy for the company's future, and inviting a new divestment tender for which strategic investors should be sought. We do not oppose BTC's privatisation but its sale to Viva Ventures. If this deal is finalized under the present terms, the telecom's lot will be the same as that of Balkan airline. For us Viva Ventures is not a strategic buyer, it lacks experince in the management of a national telecom operator, the purchase price is quite low, and the projected lay-offs are too many, Georgi Bochev, Chairman of the Telecomminications Syndicate Federation said in front of the BANKER weekly. According to him, BTC's overall modernization should be completed first of all and only afterwards the most suitable form for its divestiture should be sought - a strategic buyer or sale of its shares on the stock exchange. A similar option is already under consideration at the Ministry of Transport and Telecommunications, as per the statement of Transport Minister Nikolay Vassilev in the end of last week. Measures for raising the market value and competitiveness of BTC are to be taken and a special focus on its restructuring should be laid, Mr. Vassilev explained. It is said that the Deputy Minister of Transport and Telecommunications Nedelcho Nedelchev, who is responsible for the branch, and BTC's managerial team are already working out a programme for the telecom's organizational restructuring. The main accents in it are three: improvement of services and development of commercial activities; launching issues of eurobonds on the international financial markets, and offering 20% of BTC's shares on the stock exchange (arguments are going on if the shares should be put up for public sale on the domestic or on the international capital market). The above-mentioned scenarios are not a novelty. Serious debates on them were held back in 2002 after former premier Ivan Kostov's cabinet did not sell 51% of BTC's assets to the Dutch-Greek consortium between KPN and OTE (a selling price of USD610MN was negotiated then). In the beginning of 2001 the signing of a 3-year contract for the telecom's management was considered and a package of documents for inviting an international tender was worked out. One curious detail is that the tender dossiers included projections about the financial results, to be reached each year while the contract for management would be valid, and increasing the percentage of digitalized fixed telephone lines was invisioned. The necessary investments for the modernization were specified as well, planning them as BTC's own funds and a USD40MN loan from the European Bank for Reconstruction and Development (EBRD). It was even specified that the credit would be released at preferential terms but without state guarantees, against converting it into BTC shares (after the end of the 3-year contract for management and offering the telecom's paper on the stock exchange).However, the coming parliamentary elections drew the entire attention of UDF's government and the tender was never invited. BTC's future was left to the new Cabinet, among whose declared priorities was the quick privatisation (especially that of the national telecom). A year later two potential buyers of BTC appeared: the US investment fund Advent International through its company Viva Ventures (registered in Vienna), and the consortium between Koc Holding and Turk Telecom, and the offered purchase price for 65% of its shares was lower than its 2-year profit. Then transport minister Plamen Petrov began talking about Plan B and experts from his team worked it out. It projected that BTC would draw up to EUR200MN loan from international financial institutions and spend the money on the telecom's modernization and digitalization. According to intentions, a foreign managerial team had to be hired as well in order to prepare the company for a new privatisation procedure (or sale of its shares on the international capital market). This plan seems to have come into fashion again especially if the silence regarding the deal drags until the beginning of next year. In that case, even if no decision for cancellation of the present divestment procedure is made the State will be able to claim for the telecom's dividend, experts point out. BTC's profit for the first nine months of 2003 amounted to BGN204MN and is expected to exceed BGN280MN by the year-end. If the practice for distribution of dividend for 2003 is repeated, this means that some BGN140MN may enter the Treasury. In fact, the decision for or against BTC's sale is no more a matter of financial considerations or whatever national programmes and priorities. Things have merely been reduced to political bargaining. And that such bargains will continue was confirmed on Monday (November 17) when the consortium between Koc Holding and Turk Telecom, which was ranked second in the tender, announced that it had renewed its EUR3MN bank guarantee for the deal. In a fax to the mass media it specified that the term of the previous guarantee had elapsed and because the privatisation procedure dragged on, the guarantee was extended till January 1, 2004. Till then Deputy Premier and Tranport Minister Nikolay Vassilev's experts should be ready with their final report on the reserve option.

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